Failure of California Democrat’s Economic Agenda creates an opening for the Radical Center

Single payer healthcare in California is kaput for now, as the failed Assembly Bill 1400, to implement “CalCare,” would have required a state constitutional amendment, a supermajority in both the State Senate and Assembly, and then be put to the public for a vote. The proposal would have dramatically raised taxes, with tax raises on individuals making more than $149,500 per year with incremental increases, and additional payroll taxes on businesses exceeding $2 million in annual profits. Another failed proposal from progressive Democrats, was AB854, which would have established a 5 year eviction moratorium in rent control jurisdictions.

The failures of the healthcare and rental moratorium bills were major defeats for the “progressive” agenda in California, both failing to garner support from moderate Democrats in the legislature. Even though Governor Newsom had promised to support single payer during the recall campaign, he backed away from supporting the healthcare bill when it was proposed. Since then Newsom proposed a watered down version of single payer, that he hasn’t further pursued. Newsom may be corrupt but he is not a leftist, and is pragmatic in the sense of not wanting to alienate his affluent donor base whom the bill would have imposed a substantial tax hike on. Not to mention the health insurance industry that has been a major backer of Newsom and Democratic coffers.

Single payer healthcare is a good idea in principle but the proposal was deeply flawed. Primarily because California has one of the most inefficient state bureaucracies, with high taxes but subpar services. There were concerns that the tax hike could have penalized businesses for hiring more workers and caused an exodus of businesses and upper middle class residents out of the state, further hampering tax revenue. However, it was unclear whether the bill would have ended private health insurance or created a tiered system that allowed people to keep their private insurance.  There are better ways to expand and improve healthcare. For starters Medi-Cal could be expanded for greater coverage and improved upon for only a fraction of the cost of creating an entire new healthcare bureaucracy from scratch.

Single Payer would have to be high quality enough for most Californians to use to justify the high price tag. There are stigmas about public healthcare being for the poor and the problem of masses of people paying for something that they don’t use, which is already the case for education in California metros. California’s extreme inequality and inefficient bureaucracy poses major challenges for single payer to work. The failed proposal could have ended up being the worst of both worlds, Western Europe’s taxes but with American levels of subpar public services. Not to mention the rapidly ageing population that would further burden single payer and the issue of waitlists.

Out of the different healthcare models, the out of pocket model is a disaster, while single payer also has major flaws. However, the Bismarck model, where health insurance companies are a non-profit public utility that have to cover everybody while doctors and hospitals are private, makes the most sense. Some form of the Bismarck model exists in Japan, France, Germany, Switzerland, and the Netherlands. Quality healthcare should be free for those who need it but there should also be medical choice. Obamacare may seem similar to the Bismarck model as far as being a hybrid private-subsidized system. However, beneficiaries still end up saddled with debt and both the patient and the state subsidize for profit insurance companies. Obamacare has other significant flaws such as creating a new healthcare bureaucracy, and increasing intergenerational wealth disparities.

The problem with healthcare costs is the middle man, including insurance companies, HMOs, and big pharma’s share of the healthcare economy and issue of price gauging. This is also a problem with public healthcare, such as the UK’s NHS’s massive bureaucracy. How many costly new non-medical administrative positions would the failed healthcare bill have created? Cutting out the middle man as much as possible would make it possible to greatly expand quality healthcare coverage. Healthcare should include a public option for low income brackets and then offer insurance as a public utility, with a modest pay rate based upon what the patient can afford that is not tied to employment. There is a need to streamline the healthcare bureaucracy, including with automation and eliminating usurious for profit elements in health insurance. There are even benefits to certain libertarian regulatory reforms, such as allowing nurse practitioners to perform duties of doctors and increase cap on the number of doctors. Also incentivizing healthy lifestyles and building walkable communities can improve physical and mental health, cutting healthcare costs.  

Besides single payer healthcare, affordable housing, is an idea that could work if properly implemented, yet would be a disaster under California’s current leadership. For instance Newsom’s Project Roomkey to house the homeless in motels was a failure, which he wants to scale up. While there is a case that Project Roomkey was justified as a temporary solution to an emergency, it could end up being a haphazard policy solution that becomes permanent. It was predatory in scooping up motels that were bankrupted during the pandemic. Buying up motels to use for the homeless is not an efficient use of resources and could  harm the tourism industry and retail along commercial corridors, as it restrains the supply of real estate in areas, with constrained supply due to zoning. On the other hand, senate bill 6, which allows for underutilized commercial properties to be transformed into affordable housing, makes sense.

The State and cities waste millions on the homeless situation without results, because most of the revenue gets sucked up by private individuals, firms, and nonprofits. Buying up residential properties for homeless housing at market rate, such as LA spending up to $837k per unit, is the absolute least cost effective way possible to provide low income housing. The same applies to California legislature’s plan to spend 10 Billion to help families buy homes, which would just drive up housing costs and inflate the housing bubble, especially taking into account zoning restrictions and the role of private equity firms in real estate. The key to building large amounts of affordable units is increasing the supply of housing via zoning reform, even if targeting up-zoning in low income areas, which many progressives oppose on grounds of anti-gentrification. Also gubernatorial candidate Michael Shellenberger’s proposals for housing the homeless are reasonable and a big step in the right direction.

There has been a total mismanagement of funds by California’s state bureaucracy. For instance the massive state employee jobs program, which a large portion is about diversity programs and rewarding Democrat Party cronies. Not to mention the excessive state retirement pension costs, such as one CalPers pension that is 400k per year. We also saw this corruption in the State’s handling of the covid stimulus with giveaways to political cronies, woke pork, and just a lot of waste and misallocation of resources. Newsom’s budget is the largest in state history at over 300k, but just like with the Federal stimulus package, most of the revenue went to institutions, both public and private, rather than directly to the people. For instance Newsom’s original measly stimulus payments excluded low income Californians, who did not file an income tax, while including illegal immigrants. Even Newsome’s current “election relief package” plan does not include any direct cash payouts but a lot of pork. It was the same with Joe Biden giving out less stimulus checks than Donald Trump, despite the massive size of Biden’s covid relief package.

The Democratic Party is deadset against the idea of UBI, such as marginalizing Andrew Yang’s campaign, because it would undermine the bureaucratic client state, which is the essence of their power. Newsom’s lopsided stimulus and the state bureaucracy’s inefficient handling of the budget surplus shows why California needs a UBI. This UBI would be a birthright for all Californians, who are adult US citizens and meet some residency requirements. The revenue could come from automating bureaucracy, a tech dividend tax, consolidating non-healthcare state benefits, and an oil extraction tax like Alaska has. The diversified revenue resources would nullify inflation concerns and the residency restrictions would prevent a surge of illegal immigrants or low income residents from pouring in from other states. However, this UBI  model to automate bureaucracy and cut excessive public pension, would only work as a ballot measure that would bypass the legislature.

Even California’s budget surplus, which Newsom presents as his main success, was mostly due to capital gains taxes from tech stocks because of the stock market being propped up by the Federal Reserve’s  quantitative easing and acceleration in printing. Now the stock market is volatile and will likely crash, on top of businesses leaving the state. Therefore state coffers and pensions funds, will be drastically short on funds and the state will look to tax hikes for revenue, exacerbating the exodus and passing the burden onto younger generations.

With the failed economic agenda of both neoliberal and progressives Democrats, and conservatives failing to offer an alternative, there is an opening for a radical center or third way in California. There is a wealth of economic concepts beyond the outdated policies presented of progressives, bureaucratic liberalism, and equity based politics, and that of free market capitalism, Reaganomics, and austerity. The big tent of Radical Centrism/Third Way or syncretic politics, includes a wealth of economic solutions, including Distributism, which asserts “that the world's productive assets should be widely owned rather than concentrated.” Distributist positions are represented by the American Solidarity Party, who are also running a candidate for California governor. Other examples include Andrew Yang’s Human Centered Capitalism, Public Banking, which is also fiscally conservative because the state doesn’t have to borrow from private banks at interest, Social Credit, which is “prescribed government intervention in the form of the issuance of debt free money directly to consumers or producers,” and Smart Socialism. Smart Socialism seeks a more efficient allocation of resources or also the idea of wealth redistribution and social programs but without bureaucracy, such as direct cash payouts /UBI. Often the problem isn’t that socialism is inherently bad but rather that the people administering it are either corrupt or incompetent. For instance Elon Musk basically endorsed smart socialism when he tweeted, “I am actually a socialist. Just not the kind that shifts resources from most productive to least productive, pretending to do good, while actually causing harm. True socialism seeks greatest good for all,”

There is a legitimate case for wealth redistribution due to the severity of inequality in California. Again, wealth redistribution could work if done the right way but the factors to take into account when proposing a major tax increase are avoiding penalizing the most productive, the exodus to lower tax states, and how much tax revenue is frittered away on fraud and waste. Also take into account that California has the highest state income tax in the nation, yet still has some of the nation’s worse income inequality. Third Way economics makes distinctions between productive and unproductive wealth. Tax policy should incentivize good corporate behavior such as taxing corporate CEOs to employee pay ratios such as the measure passed in San Francisco. Other good examples of tax incentives include tax offsets to reward innovation, taxing pollution, fines on tech corporations that don’t respect free speech, taxing unproductive wealth such as the patents of big tech companies, taxing post pandemic profits such as Bernie Sanders’ proposed bill that would place a 95% tax on corporate profits greater than pre-pandemic levels, and taxing wasteful land use such as underutilized properties, parking lots, and vacancies which Andrew Yang proposed when he was running for New York mayor. Also zoning reform helps increase the tax base and is a free-market solution to ease inequality.

There is also this false dichotomy in regards to pro-regulation vs. de-regulation and the government’s role in the economy. The questions to ask are what does a specific regulation do and what interests does it serve? Newsom’s sponsored regulation, Ab5, is an example of a regulation that harms independent contractors. However, many of the deregulation policies that the GOP supports are just corporate giveaways, including to corporations that are hostile to conservatives.

A summary of third way economic policies include the Bismarck healthcare model, UBI, Automating bureaucracy, vouchers for private schools and homeschooling, public banking, tax incentives to reward production and disincentivizing waste, ending regulations that harm small businesses and independent contractors, and anti-trust policies on monopolies. There is some irony in that these policies can be populist and radically anti-establishment but also sometimes get associated with Silicon Valley techno-libertarianism by progressives. Even Michael Shellenberger has gotten accused of being a techno-libertarian but I would say he is more of an old school social democrat who also  wants a more efficient and less bureaucratic social safety net.  

It is important to emphasize that Democrats have failed to solve progressive issues such as healthcare and inequality, despite having a supermajority in California, a point that anti-establishment leftist, Jimmy Dore, often makes. Newsom doesn’t respect progressives as he is confident enough about Democrat hegemony to take their support for granted. Certainly progressives deserve blame for being subservient to the Democrat party and having really bad ideas. Not just on the woke cultural agenda but their economic solutions as well. Neoliberal establishment Democrats may be corrupt but many progressive polices are insane.

The question is how long can California’s Democrats maintain a coalition between the ultra-wealthy and corporations and progressives. Both progressive and moderate upper middle class voters, especially those with families, have different reasons to be unhappy with Newsom. California’s Democratic one party rule, might be tested with the almost inevitable economic crash coming soon.

In his book Stakes: America at the Point of No Return conservative speechwriter, Michael Anton, uses California as a case study for where the west is headed and that anyone who can fix California’s problems can fix America. There is an opening for new ideas and a third way or radical center to take advantage of neoliberal vs. progressive divide. Michael Shellenberger’s campaign for governor might fulfill that role and could win appealing to conservative, independents, and moderate democrats. SFGATE’s Alec Regimbal stated that “Newsom probably feels he stands a good chance of defeating nearly any candidate with an "R" next to their name — and for good reason. However, a race against popular independent Michael Shellenberger or one of the other three Democrats who filed for the primary would be a harder general election contest to predict.”

I have put forth a California Centrist Unity Platform on the policy issues needed to fix California. I have no plans for running for office myself but my long term project is to help facilitate a radical centrist political party or think tank focused on California issues.